FEDERAL COURT OF AUSTRALIA

Georgiou v Old England Hotel Pty Ltd [2006] FCA 705

PRACTICE AND PROCEDURE – representative proceeding – settlement agreement – approval of settlement by Court – whether proposed settlement is fair, reasonable and appropriate – requirement to give notice to group members of application for approval of settlement – whether right of review should be preserved where quantum of damages to be assessed and determined by agreed counsel – whether appropriate grounds for addition or deletion of group members by Court following approval of settlement – amended settlement agreement approved

Federal Court of Australia Act 1976 (Cth) ss 33X, 33V, 33Y

King v AG Australia Holdings Ltd [2003] FCA 980 considered

Lopez v Star World Enterprises Pty Ltd (1999) 21 ATPR 41-678 considered 

Johnson Tiles Pty Ltd v Esso Australia Pty Ltd (No 4) [2004] VSC 466 cited

Williams v FAI Home Security Pty Ltd (No 4) (2000) 180 ALR 459 cited

HARRY GEORGIOU (ON HIS OWN BEHALF AND IN A REPRESENTATIVE CAPACITY) v OLD ENGLAND HOTEL PTY LTD

VID 878 OF 2004

YOUNG J

7 APRIL 2006

MELBOURNE

UPON the Court noting the undertaking given by Maurice Blackburn Cashman Pty Ltd in terms annexed to these Orders,

The Court orders that:

1.             Pursuant to section 33V of the Federal Court of Australia Act 1976 (Cth) (‘FCA Act’), the settlement of this proceeding on the terms contained in the Settlement Agreement dated 5 April 2006 exhibited as ‘BMM-9’ to the affidavit of Bernard Michael Murphy sworn 6 April 2006 and filed herein be approved.

2.             Pursuant to section 33Y(2) of the FCA Act the notice to group members in the form exhibited as ‘BMM-3’ to the affidavit of Bernard Michael Murphy sworn 28 March 2006 and filed herein be approved as a notice to group members for the purposes of section 33X of the FCA Act (the ‘Settlement Notice’).

3.             Within seven (7) days of approval of the settlement of this proceeding the Applicant publish the Settlement Notice in each of the The Age and the Herald Sun newspapers.

4.             The Applicant have leave to file an affidavit on or before 12 May 2006 annexing a list of names and addresses of each Group Member who completes and returns the Form attached to the Settlement Notice.

5.             The Applicant have leave to file, on or before 15 May 2006:

(a)           a Further Amended Application amending paragraph 2 thereof to the effect that the Group Members to whom the proceeding relates within the meaning of section 33H of the FCA Act are those persons listed in an annexure to the Further Amended Application being a list of the names of the persons referred to in paragraph 4 hereof; and

(b)          a Further Amended Statement of Claim amending paragraph 2 thereof to the effect that the Group Members to whom the proceeding relates within the meaning of section 33H of the FCA Act are those persons listed in the annexure to the Further Amended Application.

6.             The proceeding be listed for mention on 27 October 2006. 

7.             On or before 20 October 2006 the Applicant give notice in writing to the Court and the Respondent of any proposed orders to be sought at the mention listed at paragraph 6 above.

8.             Liberty to apply on 3 days’ written notice.

9.             No order as to costs.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

REASONS FOR JUDGMENT

1                     This is an application for approval of settlement of representative proceedings pursuant to s 33V of the Federal Court of Australia Act 1976 (Cth) (‘FCA Act’).  The applicant commenced proceedings on his own behalf and on behalf of other persons (‘group members’) who fell ill and suffered physical injury or financial loss after consuming food contaminated with salmonella bacteria prepared or sold by the respondent in the period from 23 December 2003 to 7 January 2004.

2                     The applicant has reached agreement with the respondent to settle the representative proceedings.  Section 33V of the FCA Act provides that representative proceedings cannot be settled or discontinued without the Court’s approval.  Consequently, the applicant applied to the Court for approval of the proposed settlement agreement by notice of motion dated 28 March 2006. 

background

3                     The notice of motion came before me on 31 March 2006.  On that day, after hearing submissions from counsel, I adjourned the application to 7 April 2006.  It is convenient to summarise the issues raised at the hearing on 31 March 2006 because they inform the subsequent actions taken by the parties, and the reasons why I am now prepared to approve the settlement of the proceeding. 

4                     At the hearing on 31 March 2006, I raised two main issues concerning the form of the proposed settlement agreement, and invited counsel to make further submissions about those matters in due course.  The first issue concerned a provision in the proposed settlement agreement which contemplated amendment to the statement of claim after Court approval to finalise the list of group members.  The provision set out the circumstances in which the Court may add or delete persons from that list.  Clause 1.1(g) of the proposed settlement agreement provided:

‘On filing of the affidavit set out in sub-paragraph (f) above, the Statement of Claim be amended in an approved Form so that the Group Members to whom the proceeding relates within the meaning of Section 33H of the [FCA] Act be the Claimants.  However, the addition or deletion of persons to or from the said list may be effected at any time by the Court if it is satisfied that the omission or inclusion of the person on the said list was the result of a slip by the Applicant’s Lawyer or the Court.’

I expressed concern at the hearing on 31 March 2006 that the proposed grounds upon which the Court may add or delete persons from the finalised list of group members under cl 1.1(g) were too narrow, having regard to the decision of Moore J in King v AG Australia Holdings Ltd (formerly GIO Australia Holdings Ltd) [2003] FCA 980 (‘King’).  In that case, Moore J considered the question whether the Court should make an order finalising the class of group members and, in particular, whether the Court should be able to add or delete persons from the final list of group members in circumstances other than those resulting from some kind of slip or mistake.  His Honour considered that the Court should reserve a power to add or delete group members in ‘other circumstances’, and he so ordered: at [7].

5                     The second matter I raised with counsel on 31 March 2006 arose from my consideration of Finkelstein J’s decision in Lopez v Star World Enterprises Pty Ltd (1999) 21 ATPR 41-678 (‘Lopez’).  In that case, Finkelstein J was concerned with an application for approval of a settlement agreement under which an expert would determine the quantum of damages to which each group member would become entitled.  The settlement agreement provided that the expert’s determination would not be subject to review.  His Honour expressed some reservation as to whether the Court’s jurisdiction to supervise the settlement process could be ousted in that fashion: at 42,671.

6                     In the present case, the proposed settlement agreement is similar to that considered by Finkelstein J in Lopez, in that it provides for a process whereby the quantum of damages of group members’ claims is to be assessed and determined by agreed counsel.  The agreed counsel is to act as an expert.  Under cl 5.12 of the proposed settlement agreement:

‘[a]ny determination of the Agreed Counsel of an amount of damages to which the Claimant is entitled is, subject to paragraph 5.10 hereof, binding on the Claimant and the Respondent with no right of appeal therefrom.’

Clause 5.10 sets out a special process in respect of a claimant who is under a disability, which provides that the assessment of damages is subject to Court approval.

7                     In Lopez, Finkelstein J resolved the issue by reserving liberty to any group member to apply to the Court to challenge the validity or enforceability of any of the provisions of the settlement scheme.  In the light of Lopez, I wished to consider whether the Court needed to take any, and if so what, steps to preserve its supervisory jurisdiction, and whether the device of reserving liberty to apply provided a completely satisfactory mechanism for doing so. 

8                     Another issue raised at the 31 March hearing concerned the notice requirement imposed by s 33X(4) of the FCA Act.  Section 33X(4) provides that unless the Court is satisfied that it is just to do so, an application for approval of a settlement under s 33V must not be determined unless notice has been given to group members.  The applicant sought to dispense with that requirement in the present case.  Notwithstanding that notice of the proposed settlement agreement had not been given to group members, counsel for the applicant, Mr Armstrong, submitted that it was appropriate to approve the proposed settlement for essentially two reasons.  First, Mr Armstrong contended that the cost of advertising was expensive and was not warranted in this case.  Secondly, he contended that the notice requirement was unnecessary in the circumstances, having regard to the process in the proposed settlement agreement for notifying group members of the settlement of the proceeding, and giving them an opportunity to immunise themselves from the effects of the settlement agreement if they so desired. 

9                     Mr Armstrong submitted that the notice requirement was designed to ensure that group members are not bound by a settlement agreement of which they have not been given notice.  He pointed out that the proposed settlement agreement contained a process whereby group members were to return claim forms in order to access the benefit of the settlement agreement, and any group member who did not want to be bound by the settlement could achieve that result by not returning the claim form.  Counsel also submitted that notice of the proposed settlement was unnecessary because the present case lacked ‘an element of compromise’ of the value of the group members’ claims.  This was not a case where the parties had agreed on a lump sum that was to be distributed in a way that involved any form of discounting of the value of each group member’s claim.  Rather, the respondent had effectively agreed to pay each group member’s claim in full in accordance with the assessment process set out in the proposed settlement agreement. 

10                  Having considered these submissions, I was not persuaded to dispense with the notice requirement on 31 March 2006.  I was conscious that group members may wish to raise issues concerning the form, content and finality of the proposed settlement arrangement before the Court approved it.  Accordingly, I ordered that on or before 4 April 2006, the applicant cause a notice in the terms annexed to the orders to be published in one of The Age, Saturday Age or Sunday Age newspapers, and one of The Herald Sun, Saturday Herald Sun or Sunday Herald Sun newspapers.  I adjourned the application for approval of the proposed settlement agreement to 7 April 2006 so as to allow notice of the settlement and notice of the application to the Court for its approval to be advertised in accordance with section 33X(4) of the FCA Act. 

subsequent events

11                  The matters I raised on 31 March 2006 had been addressed fully, and in my view appropriately, by the time the matter came before me on 7 April 2006. 

12                  Pursuant to the orders I made on 31 March 2006, the applicant placed the required advertisements in The Age and The Herald Sun newspaper on 4 April 2006.  Following those advertisements, no group member came forward to object to any of the provisions of the proposed settlement agreement. 

13                  On 3 April 2006 the applicant and the respondent entered into an agreement to vary the proposed settlement agreement in order to address the matters I raised at the 31 March hearing.  The consolidated settlement agreement that is now before me incorporates these variations.  The applicant moves the Court for approval of the consolidated settlement agreement.

14                  The variations to the proposed settlement agreement were threefold.  First, cl 1.1(g) of the proposed settlement agreement was amended to widen the Court’s power to add or delete members from the final list of group members.  It now provides that the Court may add or delete members from the final list of group members not just in the case of error by any party, its representative or the Court, but also in ‘other circumstances’.  This reflects the language which Moore J included in the settlement agreement in King.

15                  Secondly, cl 5.12 of the proposed settlement agreement was amended to provide that the determination of the quantum of damages of any claim by agreed counsel should be subject to the right of the claimant to apply to the Court on a question of law arising from the determination. 

16                  The third amendment provides a mechanism by which the Court can maintain an ongoing supervision of the process for assessment and determination of group members’ claims.  It involves the addition of a new cl 8.3 which provides:

‘The solicitors for the parties have liberty to apply to the Court for determination of any matter arising in relation to the implementation of this settlement agreement.’

17                  In my opinion, these amendments appropriately address the issues I raised on 31 March 2006.  Indeed, the applicant has gone one step further to ensure that the interests of group members are protected: Maurice Blackburn Cashman, the solicitors for the applicant, has given a written undertaking to the Court that it will advise the Court of any group member aggrieved by the procedure for assessment of damages by agreed counsel. 

18                  I have carefully reviewed the proposed settlement agreement in the light of the relevant authorities: see Johnson Tiles Pty Ltd v Esso Australia Pty Ltd (No 4) [2004] VSC 466; Williams v FAI Home Security Pty Ltd (No 4) (2000) 180 ALR 459 (‘Williams’); King; Lopez.  I am satisfied that the consolidated settlement agreement represents a fair, reasonable and appropriate settlement of the claims made in this proceeding and that it should be approved by the Court: Williams at 465 [19].  Of its nature, the settlement is one which is readily susceptible to Court approval.  In effect, the terms of settlement provide for the admission of liability in respect of claims advanced by group members and set out a simplified process for the assessment of the quantum of damages on each claim by agreed counsel.  In my view, this is an appropriate means of ensuring speedy, efficient and fair determination of the quantum of the claims.

19                  The consolidated settlement agreement is supported by the opinions of Mr Murphy of Maurice Blackburn Cashman, a very experienced solicitor in the field of class actions, and by experienced senior and junior counsel acting for the applicant.  In their opinions, the consolidated settlement agreement is fair, reasonable and appropriate and there are no reasons why the Court should not approve it. 

20                  For the forgoing reasons, and upon the undertaking of the solicitors for the applicant referred to above, I propose to approve the settlement of the proceeding on the terms contained in the consolidated settlement agreement dated 5 April 2006. 

Associate:

Dated:              6 June 2006